Airfares soar, passengers refrain from flying

Vietnamese airlines all have raised the airfares from October 15. The return ticket for Hanoi – HCM City could be as high as 7.6 million dong, while the airfare for the Hanoi – Phu Quoc flights to 8.8 million dong.
An official of the Civil Aviation Authority of Vietnam (CAAV) confirmed that the agency has received the reports about the airfare increase plans from the national flag air carrier Vietnam Airlines (VNA), Air Mekong (AM )and Vietjet Air (VJA).
VNA plans to raise the airfare to 2.67 million dong per one way ticket for the flights on the Hanoi – HCM City route, which does not include 10 percent of VAT and 44,000 dong in airport fee.
Booking agents have advised passengers to book tickets prior to October 15, which would allow saving 200,000 dong.
Nguoi lao dong newspaper has quoted Nguyen Anh Tuan, Deputy Head of the Price Control Agency, an arm of the Ministry of Finance, as saying that the airlines have planned the 3-4 percent airfare increase, which is not an overly sharp increase. Therefore, the agency would not intervene the business plan of the airlines.
Under the current regulations, airlines would be able to automatically adjust the airfares five days after they inform to the management agencies about the airfare adjustment plan.
CAAV has also affirmed that this is a modest airfare increase which does not violate the current laws.
In principle, the ceiling airfare applied to domestic air routes has been lifted by 20 percent since December 2011, which means that the airfare for the Hanoi – HCM City flights could be up to 3.4 million dong (one way ticket) and the airfare for the Hanoi – Phu Quoc island, the longest-distance air route, could be up to 4 million dong.
However, CAAV then asked airlines not to raise the airfares too sharply at once in order to avoid shocks. Airlines were requested not to set the airfares at over 2.72 million dong and 3.43 million dong, respectively.
The request has been respected by the air carriers, which explains why they only plan to raise the airfares now instead of many months ago.
However, both the price control agency and CAAV have affirmed that in principle, airlines still have the right to set up the airfares at the ceiling levels.
If so, the ceiling airfares would be 7.6 million dong (including tax, fee) for the Hanoi – HCM City and 8.8 million dong for the Hanoi – Phu Quoc flights.
Nevertheless, airlines seem not to intend to raise their airfares to the ceiling levels allowed. The CEO of an airline said the market factors do not support sharp airfare increases. The market has been witnessing minus growth rate due to the economic downturn.
He said in 2011, only 15 percent of the total tickets sold by the airline was at the ceiling level, while the figure is thought to decrease to five percent. The majority of passengers only took the flights if they could buy tickets at low prices.
This means that sharp airfare increases would be unaffordable for passengers,, which would lead to the sharp falls in the carriage output of the airlines.
VJA, AM and Jetstar Pacific have begun selling air tickets for the flights during the Tet holiday which would come in February 2013. The airfares are between 5.8-6.4 million dong. However, the number of seats reserves remains modest.
Meanwhile, VNA has not released the ticket sale plan for Tet holiday. Analysts believe that the air carriers intends to raise the airfares step by step instead to explore the situation.